A dominant transforming gene from late passages (330) of a human teratocarcinoma cell line (PA-1) was isolated as a biologically active molecular clone and is a new isolate of the human N-ras locus. Its transforming activity is due to a single G yield A point mutation at the codon for amino acid 12, which changes the codon for glycine to an aspartic acid residue. DNA from the PA-1 cell line at early passages (36) does not yield foci in DNA transfection assays and the early passage cells are much less tumorigenic in nude mice. These results, therefore, correlate the presence of an activated N-ras locus with the enhanced tumorigenicity of a cell line. The activated N-ras gene was, therefore, either selected from a small population of the original, metastatic tumor cells or arose by mutation during passage in culture. N-ras DNA from early passage (41) PA-1 cells was cloned. Eight independent clones were inactive in the NIH3T3 transfection assay. This agrees with the genomic transfection data and preclude DNA modification as a mechansim for the inactivity of early passage PA-1 cell DNA. When the clones, biologically active PA-1 gene was introduced by gene transfer into a non-tumorigenic PA-1 cloned cell, the cell was transformed to induce tumors in nude mice. Therefore, a direct causal relationship between N-ras and the malignant phenotype of PA-1 cells was established.